Uber Lays Off 3,700 Employees Due to Coronavirus Impact

At the beginning of 2020, Uber announced that this would finally be the year the company reached profitability, after three solid years of heavy spending to boost its growth and market share and a disappointing IPO. As of the end of 2019, Uber had 67 percent of the U.S. market share for ride-shares, soundly beating Lyft, its closest competitor.

Enter COVID-19.

By the end of April 2020, Uber’s ride bookings had fallen by more than 80 percent compared to April 2019, when the company had been predicting bookings to grow further. But with more than 50 percent of businesses in the country closed to the public, fewer people are needing transportation than at any other time in the country since before the first World War. With the second fiscal quarter beginning, it’s already clear that the ride-share company won’t reach profitability this year. Or perhaps even next. Uber Eats is likely the only service keeping the company afloat at this point.

On May 6, 2020, Uber announced via a regulatory filing that it would be laying off 3,700 employees from the customer support and recruiting teams. That’s one in eight of Uber’s 27,000 in-house employees, a number which doesn’t include most of their hundreds of thousands of drivers (who are classified as independent contractors except where required by law).

The layoffs are not unexpected. In early April, Uber froze hiring, and Uber CEO Dara Khosrowshahi has chosen to forgo his base salary for the rest of 2020, while continuing to perform his role.

“We are looking at many scenarios and at each and every cost, both variable and fixed, across the company,” Khosrowshahi wrote in a memo to employees. “We want to be smart, to move fast, to retain as many of our great people as we can, and treat everyone with dignity, support, and respect.”

The pandemic, while obviously the largest threat to Uber’s books, is not the company’s only struggle. California’s attorney general has sued Uber, along with Lyft, for classifying its drivers as contractors while treating them like employees. If Uber loses the lawsuit, it will have to give benefits and guaranteed wages, as well as reimbursement for operating costs, to nearly all of its drivers in California. The company might have to do so retroactively for up to two years, at the discretion of the court. If so, the lawsuit may cost the company billions. Billions that as of right now, it doesn’t seem to have.